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February 12, 2021

Report on recent US international tax developments 12 February 2021

The United States (US) House Ways & Means Committee on 11 February approved along party lines a package of provisions that comprise about half of President Biden’s US$1.9 trillion1 COVID relief plan. The package would provide direct payments, a child tax credit expansion in the form of direct payments, earned income tax credit and child care tax credit enhancements, as well as an international tax change that would repeal the election for US affiliated groups to allocate interest expense on a worldwide basis beginning in 2021. Recall that Internal Revenue Code2 Section 864(f) was added to the tax code in 2004 but the provision had been deferred several times. Repeal of the worldwide interest allocation rules would raise roughly $22 billion over 10 years, according to a Joint Committee on Taxation estimate.

The Ways and Means package of provisions represents the Committee’s portion of a Fiscal Year 2021 budget reconciliation bill. Other committees have considered or are considering their portions, and the combined package could be enacted within the next several weeks with solely Democratic support. House Speaker Nancy Pelosi said on 11 February she wants the House to pass the legislation by the end of February, which would then be taken up by the Senate. Congressional Democrats and the Biden Administration are seeking to have the COVID-19 package enacted before certain unemployment benefits are scheduled to expire.

According to the tax press, Treasury may soon open a project to revive transfer pricing aggregation regulations under Section 482 that were issued in temporary form in 2015 but expired in 2018 without being finalized. When the 2015 temporary regulations expired in September 2018, taxpayers were left with a statutory aggregation rule under Section 482 without further guidance for intangible property transfers occurring after 14 September 2018.

If Treasury does revive the 2015 temporary regulations, it is unknown how the new regulations will be issued. While it may be possible for Treasury to use the prior proposed regulations to directly promulgate final regulations, it is more likely that the new regulations would be issued as part of a larger regulation package. It is also possible that, given the comprehensive international tax overhaul from the Tax Cuts and Jobs Act (TCJA), Treasury will start from scratch and draft a more comprehensive overhaul of the transfer pricing regulations to incorporate other statutory changes from the TCJA, such as the new statutory definition for intangible property contained in Section 367(d)(4). See EY Global Tax Alert, US Treasury to consider reviving expired transfer pricing aggregation regulations, dated 8 February 2021 for details.


  1. Currency references in this Alert are to the US$.

  2. All “Section” references are to the Internal Revenue Code of 1986, and the regulations promulgated thereunder.


For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


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